The CD, which revolutionized the music industry in the late 1980s and early 1990s, could be on the way out.
Best Buy (BBY) will stop selling compact discs on July 1 nationwide, according to Billboard, and Target (TGT) is reportedly setting new terms with music companies that could severely impact CD sales at the retailer.
The threats to the CD format come as music streaming continues to explode in the music industry. Revenues from streaming music services accounted for 62% of the total market for the first half of 2017, according to newly-released numbers from the RIAA, the music industry’s U.S. Trade group. Physical sales, which are comprised of both CDs and vinyl albums, made up 16% of the overall revenues. Revenues from shipments of CDs were down 3% to $431 million, while vinyl albums were up 3% to $182 million.
Best Buy will keep selling vinyl, but as CD sales continue to fall, it decided to use the floor space for other products.
Target, meanwhile, is demanding that music suppliers take the inventory risk on CD sales, says Billboard. That, essentially, means the retailer wouldn’t pay music labels for CDs until after they’re sold to customers, rather than the current practice of paying in advance and then receiving a credit when it ships back unsold units. The chain has reportedly set a deadline of April 1 or May 1 for music manufacturers to respond.
Should the record labels decline, Target may further reduce its music presence. If so, that would be a big blow to the CD format. According to Billboard, Target has sold over 500,000 copies of Taylor Swift’s Reputation since it was released in November 2017.
Best Buy did not reply to Coins2Day’s request for comment, but a spokesperson for Target acknowledged the company is reevaluating how it conducts some areas of its business.
“Entertainment has been and continues to be an important part of Target’s brand,” the company said. “We are committed to working closely with our partners to bring the latest movies and music titles, along with exclusive content, to our guests. The changes we’re evaluating to our operating model, which shows a continued investment in our Entertainment business, reflect a broader shift in the industry and consumer behavior. We have nothing more to share at this time.”